By Shuli Ren

Secretary of State John Kerry and his Russian counterpart appeared to make no major advances on Sunday, but the perception is that neither side wants to escalate the Ukraine crisis further. The Russian ruble gained 1.7% against the dollar today and the Market Vectors Russia ETF (RSX) advanced 4%.

The US has abandoned any attempt to force Russia to reverse the annexation of Crimea, while Russia seems happy to give the assurances that the West is demanding on the integrity of the rest of Ukraine.

However, Debono warns this is not the end of the story:

For a start, the US and EU financial sanctions and travel restrictions on selected Russian officials remain in place and they could still be stepped up. The US is insisting that international recognition of the new status of Crimea will depend on the agreement of the Ukrainian government.

In the meantime, the Russian economy and financial markets are still under pressure. It may take some time for the full effects of the existing sanctions to be seen – for example in reduced investment.

There is also scope for tensions to build in ethnically Russian areas elsewhere, including in the Baltic states.

Despite the recent rallies, Russia is still the worst performing emerging market this year. The ruble is down 6.9% against the dollar, even though Russia runs a current account surplus and has a massive foreign exchange reserve, and the Market Vectors ETF has slumped 17.6%.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.